I am a CPA in Texas with an MBA from the University of Chicago. I have seen a lot and made many mistakes. Hopefully by now I will have learned something from them. Just as importantly, you may learn something from my mistakes. You can e-mail me by clicking on my "View my complete profile".

Wednesday, March 18, 2009

What Does PWC Know?

"After funneling billions in investor money to Bernard Madoff over nearly two decades, Fairfield Greenwich Group is offering up its explanation to investors: It scrutinized Mr. Madoff's trading, but the documentation he provided was false. ... [Due diligence] included examining what Fairfield described as reviewing 'independent' trading records. ... In an account of its dealings with Mr. Madoff provided to the [WSJ] concerning Fairfield's main Madoff fund, Fairfield Sentry, Fairfield says Mr. Madoff fooled them and others, including the Sentry fund's auditor, PricewaterhouseCoopers. Fairfield says the Madoff firm supplied falsified trading documents, including what Fairfield says now appear to have been fake electronic records from Depository Trust & Clearing Corp., an independent firm that inventories much of Wall Street's stock and bond holdings. ... In a visit to Mr. Madoff's offices around the time, Jeffrey Tucker, Fairfield's co-founder, discussed the articles with Mr. Madoff, according to a spokesman for the firm. Mr. Madoff gave Mr. Tucker a chance to so his own spot check, letting him randomly select two dates and two and from those days, select two stocks that had been traded in Fairfield's accounts, the spokesman says. ... Fairfield also says that auditors from [PWC], Sentry's auditor starting in 1993, accompanied by a Fairfield employee, went to Mr, Madoff's offices in 2002 and scrutinized a number of Sentry's trades and didn't raise any concerns to Fairfield", my emphasis, Tom Lauricella at the WSJ, 2 March 2009.

Will Fairfield sue PWC for negligence? Did PWC know what it was looking at?